28 December 2016

Apple, Ireland and the EU

Apple has formally appealed its €13billion tax bill which was levied when it was determined that Ireland had given the Silicon Valley giant illegal tax breaks. Apple employs thousands within the Irish Republic and has invested millions of dollars into its economy. And Apple is by no means the only American company to do so. Altogether American firms employ over 100,000 people in Ireland and have invested close to $200 billion.

Ireland wants to retain this investment and in particular wants to keep Apple on their shores. The fact that they're using the Republic as a tax shelter and means of asset protection is well known in Dublin. But they're happy to forego the revenue to keep the jobs and investment.

The US through various means has been pursuing civil claims against EU giants Deutsche Bank and Credit Suisse and many viewed this as tit-for-tat retaliation for the Apple ruling... a case of Washington/Wall Street vs. Brussels/Frankfurt/Zurich.

The US recently agreed to settlements and allowed both European firms to settle for virtually half the price of the original fines and penalties.

The projected $14 billion fine levied on Deutsche Bank was particularly newsworthy in that if carried through, the bank would have probably collapsed in a state of insolvency. The entire German political order was being put at risk.

And yet it was probably assumed by many in the United States that the EU would reciprocate and show some gratitude in easing up on Apple and by extension other US corporations.

But the EU isn't backing down.

And the Justice Department is now continuing the crusade in going after the world renowned British banking giant Barclays. The US is accusing them of what could essentially be termed malpractice. How this affects the EU in light of Brexit is anyone's guess. And it's taking the EU-US conflict into another round.

As a consequence this is quickly turning into a test for the incoming Trump administration. His America First protectionism means that on the one hand he's going to step up and fight for US economic interests. Of course on the other hand it could be pointed out that part of his protectionism would be to demand that corporations like Apple bring the money and the jobs back home. You can be certain Apple operations in China will enter the picture. He could potentially craft a grand bargain and score a huge political victory. Either way any gain for Trump is a loss for the EU and especially for Ireland.

Apart from the EU losing face and Apple losing money, Ireland has the most to lose. In fact unless Brussels backs down, Ireland is going to experience some form of loss whatever the outcome. Whether Apple pays up or Trump works a compromise and convinces Apple to bring its cash and workers back to the US... Ireland takes a hit.

It is the responsibility of the Irish government to collect the tax. The legislative and judicial authority lies in Brussels and as Dublin has now learned, EU laws overrule Irish domestic policy. And so Ireland is legally bound to compel Apple to pay up. For Brussels this isn't about collecting the money, of which they would only receive a part in terms of the tax Ireland pays to the EU. It's really a question of authority.

Ireland wants to support Apple and the tech sector. It's become a crucial component of their economy. And in addition they know that at the end of the day the Apple payout won't really help them. It might very well drive Apple and others from their shores. So they have every reason to fight Brussels and resist playing the role of bag man and enforcer.

Trump doesn't have to wade into this but if he does he can win big... or lose a lot of credibility if his intervention fails or even makes things worse.

Although it must be confessed that with Trump there is always a third option. He can work out a deal and lie about its nature and contents. Trump's presentation of his deal with the Carrier Corporation was completely misleading and represents a taste of the kind of dishonest presentation his administration will standardise.

Apple is anxious and this has been made clear by Tim Cook making the bitter pilgrimage to Trump Tower. Cook, a sodomite and a capitalist, heading the world's cutting edge tech firm represents in many ways the face of much of the business community and for that matter the values of a significant portion of modern American culture. It's a growing demographic (very generalised of course) that in many ways is contributing to the breakdown of the Two-Party system.

Few of the business community's leaders are social conservatives but fiscally they are pro-Wall Street and for deregulation. Hillary Clinton was in many ways the perfect candidate and yet as Cook has shown, though he may detest Trump's character, values and those who surround him... at the end of the day, he's more likely than not an ally, or at least Cook hopes so. Trump has certainly sent mixed signals and already during the transition has given indication that his protectionist policies may be more in line with the Washington status quo... protecting big business at the expense of working people. A protectionist-populist wouldn't be filling his cabinet with billionaires and bankers.

This will be another story to watch in 2017, and may prove to be something of a harbinger offering insight as to what course Trump will actually take vis-à-vis corporate America.


  1. While we can discuss Ireland being the theater for a proxy war between American and EU interests, let us not ignore the elephant in the room. As you stated, it is the responsibility of the Irish government to collect the tax. Had they done this from the beginning instead of kowtowing to Apple's demands, they could have avoided this mess altogether.

    Instead, they opted to sacrifice integrity and credibility for short-term gains and now they're paying the price. I would like to think that this will serve as an object lesson of what not to do for other governments but I'm not optimistic. As a friend of mine once said, it's an example of being penny-smart but dollar-stupid.

  2. Agreed! In no way was I suggesting that Apple or Ireland are off the hook. The lesson here is... everyone is dirty and everyone is self-serving and power-mad. But if Ireland had collected the proper tax, then Apple would have probably gone somewhere else. Another lesson is, if you're honest, you lose. And so the notion that Christians are going to function in this cesspool and maintain integrity is just laughable. If we walk in integrity, we will be pushed to the margins. The idea that people in congress or that oil company executives and Wall Street people are engaged in Bible study and are exercising their faith in the public square is delusional. It would be funny if it wasn't so tragic.

  3. I think one blessing in disguise for the church is that the current generation of capitalists exercise no pretense of morality and are up front about their willingness to be ruthless in their acquisition of wealth. Martin Shkreli, the hedge fund manager who cornered the market on a life saving drug and resold it at a grossly marked up price (who is also currently under investigation) is one such example. The CEO of Apple you mentioned is another. While they may say that the rule of law is important in maintaining a functioning free market system, in practice they are all too willing to ignore it or bribe politicians to change existing regulatory frameworks to suit their interests.

    I've also noticed that these people tend to be antagonistic toward religion in general. They regard it as a colossal waste of time with a huge opportunity cost. Those who still cling to their beliefs are seen as useful idiots at best, and if their continued existence serves any purpose, it's to maintain the status quo. When Donald Trump courted the evangelical vote, one would not be remiss in assuming that he did so for precisely this reason. The man worships himself and doesn't care about the Bible or Christianity. Only a complete ignoramus could miss this.